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A Pakistani social media influencer excitedly showed off a new Birkin bag on her Instagram stories while telling her 500,000+ followers that “this is a financial investment”. Yes, Birkin bags can actually be a financial investment. But unfortunately, for her fans who now feel like they have a justification to buy expensive bags, there are many caveats. The main one: it needs to be in pristine condition, which means you probably cannot wear it too much.

Incomplete financial advice like this is rampant in the world of social media on a daily basis and that too, without any accountability.

Add this to the viral TikTok videos where some actually go as far as advising their audience to “don’t tell the bank” important investment details which in other words is known as fraud.

We are now in an era where social media is increasingly starting to replace Google search and the youngest generation is now dubbed as the “social media” generation. So when TikTok proudly boasts of how “1 in 2 have purchased a financial product they saw on TikTok” - it can be a cause for concern.

A web of scams

Visualise the impact of the content creator who unintentionally dishes out misleading financial information either to educate or amass followers. But those who pursue social media as a tool for their malicious purposes — their impact has been detrimental this year alone.

Earlier this year, online apps and cryptocurrency exchange Binance was used to scam many Pakistanis and involved billions of rupees.

Even the recruitment of scammers can be a scam itself where this October, the Indian government claimed to have rescued about 130 Indians who were forced to work in cyber-scams in Myanmar, Laos and Cambodia.

Now the Sidra Humaid Ponzi scheme is upon us where an online committee system was operated through the Facebook platform, and then used to defraud members of around Rs420 million.

This brings to light the gender gap in financial literacy as well financial inclusion. Another vulnerable group to social media scams are senior citizens who, according to a study, lose almost $13 billion each year in the US due to scams which are mostly online.

Instant gratification

The quickest way to low self esteem is social media which in turn utilises this to create a mindset of instant gratification. Everywhere you look, users curate their accounts to display only the best aspects of their life and a lot of it is materialistic.

Comparison and want for luxury becomes inevitable. There have been Pakistani influencers who have shared the scores of sales beauty product companies have achieved simply through their collaboration in a matter of a few days. It gives a jarring insight into how social media affects purchases and how it needs to be now.

Essential concepts in financial literacy like emergency funds, budgeting, savings go out the window as customer psychology is shaped by the bombardment of images of the things they think they now want.

Also, any financial decisions are dictated by short-termism so retirement accounts and questions about the financial future become irrelevant.

The combination of materialism, Pakistan’s inequality crises along with the reckless sharing of information online (for example locations) makes for a dangerous combination.

There are some Pakistani content creators who try to show their negative moments in life to achieve a more balanced perspective, as well as those who push for recycling and thrifting, but there is a long way to go.

There are positives

A survey by Certified Financial Planner Board of Standards showed that 77% of financial planners were male and over the age of 40. Social media is helping bridge the gender and age gap through credible content creators who are targeting younger women.

In addition, digitalisation is improving financial inclusion especially for the ASEAN digital generation according to recent reports. It brings increased access to financial services for both business and personal needs. It also brings access to the elite financial advisors located around the world and has enabled networks to be formed as social media has connected people in a way that has never been done before.

Moreover, you do see influencers who do offer insightful advice and knowledge, and who can link you to informative podcasts, newsletters and books.

Social media is a powerful tool for financial advancement and there are numerous success stories of when harnessed the right way. The best success story would be of an underprivileged Pakistani accessing financial knowledge as it is being explained to him in a simple 30 second video.

Way forward

Instagram requires content creators to add a hashtag whenever they promote a sponsorship. A similar framework is needed when monetary related advice is given by a person who is not an expert in the financial field. In addition, the Supreme Court in the UK ruled that CV fraudsters be penalised and similar action should be taken on a global level to create a sense of accountability.

Finally, we need to add two more items to the Financial Literacy playbook of 2022-2023. The first would be how to manage realistic financial expectations and to differentiate between reality and false appearances. Secondly, communication and consulting with others before making an important financial decision because numerous scams have been the product of sole decision-making.

Social media, like other things has its pros and cons. But with the current climate of zero accountability and security issues, it does tilt towards endangering financial wellbeing. Inevitably, financial literacy and awareness have never been more crucial and urgently required.

Imagine heeding to financial advice on social media, and landing in trouble. Who can you blame then?

The article does not necessarily reflect the opinion of Business Recorder or its owners

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Khadija Husain

The writer is a HR professional based in the US

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